ECONOMICS

COST ACCOUNTING

FLEXIBLE BUDGETS

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Managers use budgets for ____ business activities.
A
planning
B
controlling
C
planning and controlling
Explanation: 

Detailed explanation-1: -Budgets are necessary to highlight the financial implications of plans, to define the resources required to achieve these plans and to provide a means of measuring, viewing and controlling the obtained results, in comparison with the plans.

Detailed explanation-2: -Management uses budgets to evaluate the performance of employees and their department. They can also use budgets to evaluate and benchmark the performance of a business unit in a large business or of the entire performance of a small entity. They can also use budgets to evaluate separate projects.

Detailed explanation-3: -The Use of the Master Budget The master budget summarizes projected activity by way of a cash budget, budgeted income statement and budgeted balance sheet. Most master budgets include interrelated budgets from the various departments. Managers typically use these subset budgets to plan and set performance objectives.

Detailed explanation-4: -Creating a budget is an important pillar of your overall success and security. It allows you to oversee and better understand whether your business has enough revenue (incoming money) to pay its expenses. Using a budget can help you make more informed financial decisions.

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